title: The voluntary-threat approach to control nonpoint source pollution under uncertainty.
abstract: This paper extends the voluntary-threat approach of Segerson and Wu (2006) to the case that the ambient level of nonpoint source pollution is stochastic. It is shown that when the random component is bounded from the above, fine-tuning the cutoff value of the tax payments avoids the actual imposition of the tax while the threat of such payments retains necessary incentive for the polluters to engage in abatements at the optimal level. If the random component is not bounded, the imposition of the tax cannot be completely avoided but the probability can be reduced by setting a higher cutoff value. It is also noted that the regulator has additional flexibility in randomizing the tax imposition but the randomization process has to be credible.
authors.affiliation: School of Business, East China University of Science and Technology, 130 Meilong Road, Shanghai 200237, China. Electronic address: liyouping@ecust.edu.cn.
authors.forename: Youping
authors.initials: Y
authors.lastname: Li
mesh_terms: D052918:Environmental Restoration and Remediation / Q000191:economics / Q000379:methods*; D008962:Models, Theoretical; D009042:Motivation; D013269:Stochastic Processes; D035501:Uncertainty; D014876:Water Pollution / Q000191:economics / Q000517:prevention & control*
keywords: Abatement; Nonpoint source pollution; Voluntary-threat approach